we’ve been surveying our customers on a weekly basis to understand the results of COVID-19 on the community. Our survey results indicate that over 65 percent of Faire brands and merchants applied for the Economic Injury Disaster Loan (EIDL), Paycheck Protection Program (PPP), or both. In May, over 50 percent of respondents got a partial or full loan.
In case you have received funding, now is the time to begin considering loan forgiveness.
On May 15, the SBA published new information regarding PPP loan forgiveness, so we’ve laid out the most relevant information for you . Additional information may be coming, and we’ll keep you updated as we learn more.
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How can I get loan forgiveness?
What is the application procedure?
Lenders are currently accepting loan forgiveness applications. Your lender has 60 days from the application submission date to make a decision, so it’s in your best interest to submit a thorough and thoughtful application.
After completing the application, you will have to compile the following information from before February 15, 2020:
- Payroll documentation
- Proof of mortgage payments
- Proof of lease payments
- Proof of utility payments
Please bear in mind that even in the event you get loan forgiveness, you may still must pay taxes on the amount you received. We recommend speaking with your own tax adviser to navigate this.
What qualifies for loan forgiveness?
Which expenses qualify for PPP loan forgiveness?
At least 75 percent of your PPP loan needs to be used for payroll costs in order to qualify for loan forgiveness. Here’s What you will need to know about eligibility:
- Payroll and covered expenses for employees: Eligible payroll costs may include salary, wages, and ideas around $100,000 annual pay per employee. Additionally, covered benefits for employees may rely as payroll costs, such as health care expenses, retirement contributions, and state taxes that you pay on employee payroll.
- Payroll for yourself: If you are self explanatory, your payroll (but not earnings ) will count as payroll costs.
- Number of employees: In the eight months following loan disbursement, your average number of full-time employees must stay exactly the same as it was pre-pandemic. You can elect to base this average on one of two time frames: either February 15, 2019–July 30, 2019 or January 1, 2020–February 29, 2020. Otherwise, the complete quantity of the loan that’s forgiven will be reduced based on how plenty of people that you let go.
On the other hand, around 25 percent of loan forgiveness may cover non-payroll costs that were set up before February 15, 2020. Eligible non-payroll costs include these costs:
- Mortgage obligations: Including interest payments on your organization mortgage obligation (excludes any prepayments or principal payments).
- Rent responsibilities : Rent or lease payments on your company.
- Utility payments: This covers payments on solutions to your company including electricity, gas, water, and transportation.
How long do I want to use this loan in order to qualify for loan forgiveness?
Originally, it was announced that debtors have eight months from the loan disbursement date to use their funding. However, the SBA’s May 15 guideline explains what could be done for expenses that are scheduled to be paid “covered period.”
- For payroll costs: The loan covers payroll costs paid and incurred during the eight-week guaranteed period. Payroll costs that you incur but still haven’t paid during this period are eligible for forgiveness if they are paid on or before the next regular payroll date.
- For non-payroll costs: To qualify, non-payroll costs need to be paid during the eight-week insured interval or incurred during that time and paid on or before the next regular billing date.
What if I don’t qualify for loan forgiveness?
What happens if my expenses aren’t eligible for loan forgiveness?
It’s possible that part of your loan is not eligible for loan forgiveness. If you will need to repay your loan, here is what you will need to know:
- Loan payments will be deferred for six months
- No collateral or personal guarantees are required, and you won’t be charged fees
- Your PPP loan has a maturity of two decades and an interest rate of 1 percent
Rather, please reach out to your creditor should you not need to use the PPP loan you have received. There’s simply no prepayment penalty if you repay such loans early.
What happens if I get both a PPP and an EIDL advance?
Small business owners in the U.S. can apply for an EIDL advance of up to $10,000. This progress differs from the PPP loan because it won’t have to be repaid and can be used to cover all business-related operating costs.
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